Travel Tuesday

Travel Tuesday (#1)

One of the reasons that many of us believe that we’re not able to travel is simply because it is too expensive. Today, we’re not going to talk about how to “travel hack” for cheap or free flights, how to find reasonable accommodations, or even how to pick a location… but today we’re going to talk about how to make a budget, how to save for it, and how to stick to it.

I’m not as much of an avid traveler as I would like to be. My usual travel consists of a short flight from San Francisco to San Diego that I make almost every month for a weekend. But as you can imagine, these trips tend to add up. Fortunately, I’m able to live with my girlfriend when I stay, but travel and food costs alone can add up to nearly $500 a trip. A trip that I make almost 12 times a year.

Needless to say, I’ve found systems that work to help me stay within my budget while planning for a larger 2-week trip each year and finding deals.

Today, it is all about how I budget for those trips.

I break the budgeting down into a few parts

1. How much it’s going to cost

2. How much I need to save each paycheck to afford the travel

3. How much will it cost me each year (if this is a reoccurring trip)

4. And then… ways to save.

Cost Calculations:

Something I do for every trip is open up a new spreadsheet to begin to formulate a budget.

Most travel expenses come from the following 4 categories

Travel (Flights, public transport, ridesharing, car rentals…)

Accomodations (Hotels, hostels, couch surfing…)

Food and drinks (This is always a big one for me)

Documentation (Permits, visas, passports…)

I begin by making four separate tables on the spreadsheet with each of the titles listed above and begin to research all of the following categories.

This is where advising your planning becomes very tricky. It was easier for me to create an accurate budget while traveling to San Diego because I simply had to look back on credit card statements to figure out exactly how much I spent and look to see if there were places where I could adjust the budget in any way.

In the following weeks, I will go into each category in depth to explain how I actually go about finding accurate numbers. But this week, I would like to begin at a more surface level.

I also tend to include some buffer for miscellaneous or unexpected expenses that account for roughly 10% of the trips total cost, just in case.

Saving for travel:

I like to call this method the “payment plan method.” Nearly everything today can be bought in payment plans, so I’m sure you are all very familiar with this concept.

This concept, however, collects positive interest instead of having to pay additional. For this payment plan of sorts, you’re going to take the total cost of the trip and split it evenly between 10 months (we’re going to exclude the month you travel and the month before). Each month, you want to contribute to a separate high-yield savings account the amount that you have calculated. I believe that it works best to divide it between each paycheck as an “out of sight, out of mind” expense. Simply, for those paid bi-weekly, you will want to spread it out between 18 paychecks and so on…

This money will often collect enough interest itself to pay for small parts of the trip, including souvenirs, drinks, or desserts.

Now, this takes some experience as some parts of the trip may be more expensive than others.

For example:

Your trip to Italy for 14 days you have calculated to cost $4,500 for both you and your spouse. Not only is this possible, but it is exactly what I am doing this year. You add your 10% buffer, and for the sake of easy math, let’s say the total is $5,000. Looking at your budget you notice that nearly a third of your total cost is a flight, and another third is your accomodations.

A small “travel hack” tip is that international flights are often the cheapest 6 months from the date of travel. This means I will have to have the $1,500 for plane tickets ready after the first 6 months and the additional $1,500 for accommodations just two months later when I believe that you have the best mix of affordability and options for accommodations such as Airbnbs, hotels, or hostels. You can wait longer, but your options tend to be very limited, even if they are slightly less expensive

This all means that the savings might need to be really top-heavy, focusing intensely on savings for the first 6 months to coast out the final 4.

We will get more into savings another week.

Recurring Expenses:

Some trips, like my trips to San Diego, happen regularly enough that I am able to sum them up at the beginning of each year and set aside money in a similar way to the “payment plan method.”

On average, each trip to San Diego I take costs $350. This is incredibly low because I have access to free accommodations, but it still works for this exercise. Knowing that, on average, I want to make the trip once a month, not including the summer, I expect to make this trip 10 times, giving me a total of $3,500 for the entire year.

For some people, it may be easy to put aside $3,500 at the beginning of each year as something like a one-time yearly payment budget; for me, it’s much easier to set aside portions every week or every day to pay for these trips.

Something that I have learned is to take advantage of your nature’s necessity for instant gratification. If you are aware that you want to make this trip, and instead of going to McDonald’s on your way home, you cook food. You can instantly set aside the money for McDonald’s (always overestimate and round up) into that fund as a treat for making the right decision, and believe me, it adds up.

Payment plan method at work:

The last thing that I want to touch on is the beauty of the payment plan method. Let’s say that this year, our trip to Italy costs an all-in price of $4,750, leaving $250 in the payment plan account. Instead of removing that money, simply ignore it and let it collect interest while you save it for maybe a day when you just fall a little short on a trip’s budget, or you go a little extra with a dinner night. Eventually, this money may even add up enough to make it possible for you to actually make that “one-time payment” at the beginning of the year. And while it isn’t, it will feel like free trips for the year.

Have a wonderful Tuesday, don’t forget to daydream,

Peaks and Valleys